Exports down, manufacturing slower in April

MANILA, Philippines—The value of Philippine-made goods shipped overseas fell by 4.1 percent year-on-year to $4.376 billion last April as demand in major markets remained fragile, the government said on Wednesday.

The Philippine Statistics Authority (PSA) also reported that factory output growth, as measured by the volume of production index or VoPI, slowed to 1.4 percent at the start of the second quarter from a robust 10.8 percent a year ago as well as March’s 16.1-percent expansion.

The export sales posted in April were less than the $4.563 billion recorded in the same month in 2014, bringing total exports during the first four months of 2015 to $18.623 billion, 1.2-percent less than $18.840 billion at the end of April 2014, preliminary PSA data showed.

“The decline is partly reflective of fragile global economic conditions, as most trade-oriented economies in East and Southeast Asia also registered negative export performance in April, with only Vietnam in positive territory. Weaker demand conditions in some of our major trading partners, particularly China, were seen,” Socioeconomic Planning Secretary Arsenio M. Balisacan said in a statement.

Balisacan, who is also the director-general of the National Economic and Development Authority (NEDA), warned that in the near-term, “the country’s export sector remains vulnerable to declining demand from major trading partners.”

“The softening of economic activity in China as well as the still fragile economic growth of Japan remains a downside risk for the Philippine export sector,” according to the NEDA chief.

The country’s top 10 destination of exports in April were Japan, the United States, China, Hong Kong, Singapore, South Korea, Germany, Taiwan, Thailand and The Netherlands.

“To counter the weak demand from our major markets, the government should maximize existing trade agreements, especially with emerging economies benefiting from the low oil price environment. Also, this shows the importance of restoring traction in government spending,” Balisacan said.

Sluggish spending on public goods and services had been tagged as a major culprit for the disappointing 5.2-percent economic growth during the first quarter.

Last April, slowing sales of agro-based, mineral and oil products dragged total exports.

Petroleum shipments registered a sharp 94.8-percent year-on-year drop, as “falling crude oil prices in the international market continue to partly affect the country’s exports,” Balisacan explained.

In the case of minerals, outbound shipments went down by 18.2 percent mainly on slower demand for copper concentrates and iron ore agglomerates.

As for agro-based goods, their exports declined by a third year-on-year due to low orders of fruits as well as vegetables.

Meanwhile, the PSA also reported that growth in manufacturing activities slowed last April despite the higher output in the following sectors: basic metals, beverages, chemicals, tobacco, furniture and fixtures, leather, machinery (except electrical), paper and paper products, printing, and textiles.

The manufacturing sector’s value of production or VaPI last April, meanwhile, dropped by 4.2 percent, reversing the 10.9-percent growth a year ago and the 9.7-percent expansion posted in March. Average capacity utilization also slightly slipped to 82.3 percent in April from 83.5 percent last March, the latest Monthly Integrated Survey of Selected Industries or Missi showed.

Balisacan nonetheless pointed out that greater investor interest in the country would bolster manufacturing moving forward.

“Despite the April numbers, investors remain confident of the growth prospects. Proof of this is the recent expansion of the Taiheiyo Cement Philippines Inc.’s facilities in San Fernando, Cebu to boost productive capacity in anticipation of higher demand for construction materials,” Balisacan noted.

“A number of Japanese firms are also poised to relocate to the country. In addition to the supply of skilled labor, some firms also want to maximize duty-free benefits in the Philippines under the European Union’s Generalized Scheme of Preferences Plus,” the NEDA chief added.

But Balisacan warned that the dry spell brought about by the El Niño phenomenon would impact on the production of raw materials as well as finished goods sourced from the agriculture sector.

“The production of agro-based commodities will continue to feel the impact of prolonged drought in tandem with the occurrence of stronger and erratic typhoons. This will ultimately affect production,” he said.

According to Balisacan, “the government must encourage more value-adding activities, especially those that increase the linkage between agriculture and manufacturing.”